The Heartbreak Market
Real estate report.
Mobbed open homes. Multiple-buyer bidding wars. All-cash offers from out-of-town investors. If it seems like 2005 all over again in the local housing market, that’s because it kind of is.
Home prices from Orinda to Livermore are creeping back toward prerecession levels. Combine that with pent-up demand, the red-hot regional economy, and a historically tight housing inventory, and it seems harder than ever to tap into the good schools, tight communities, and beautiful open spaces that make the East Bay such a desirable place to live.
That’s great news for anyone who wants to sell a house. But what’s a home buyer to do? We caught up with four couples on the hunt for their dream home. Some found success; others did not.
Welcome to... The Heartbreak Market
One item in particular is on Trevor and Annie Fox’s wish list for their first home: a two-car garage.
“We’re always building stuff—furniture, DIY projects,” says Trevor. “So as silly as it sounds, the garage is actually a pretty big deal.”
The Oakland couple hoped that their hands-on skills would give them a leg up in the competitive Lamorinda real estate market: Not only are they willing to tackle a fixer-upper, but they’re looking forward to it.
The Foxes started searching more than a year ago for two- or three-bedroom homes in the $700,000 to $800,000 price range. But they found themselves repeatedly outbid—by investors and home flippers with cash in hand on the lower end, and by older, more established families willing to pay above asking price on the higher end.
They went to dozens of packed open houses and placed offers on three homes, without so much as a counteroffer. For one property, a two-bedroom in Walnut Creek, they bid $50,000 over asking—only to see it sell for another $100,000 beyond that.
Dana Green, Pacific Union, Lafayette.
It’s a jungle out there for first-time home buyers. The good news? Three simple steps will increase the odds of landing a home, Green says.
Do your homework: “There are so many resources out there: realtors and sites like Zillow and Trulia, where you can get price comparisons within certain areas. Get yourself in a position where you understand the market, so you can be aggressive when the right house comes along.”
Prepare your finances: “It’s a big process to get yourself really, truly qualified. You have to go through the whole underwriting process to understand what you can or can’t do lending wise.”
Get a good agent: “I know we all like to be independent and think we can do everything, but get the help. Find a real estate agent you trust. It’ll ease the process.”
It’s not as if the Foxes aren’t good candidates. Trevor, 31, is an advertising executive for a commercial real estate services company in San Francisco, and Annie, 30, works as a program manager for an online media company on the Peninsula. The project-minded couple have squirreled away savings for an ample down payment while renting in Montclair.
“Considering how well qualified we are—I mean, we went through the approval process—it’s still been difficult to find a property,” says Trevor.
The couple are still renting after a full year of gauging the market, but they believe they’re better prepared to act aggressively when they find the right place—maybe by outbidding a couple new to the house hunt, as they once were.
“I feel like we have some renewed energy; we’ve kind of gotten ourselves back on our feet and are ready to go again,” says Trevor.
Adds Annie: “I’m actually curious what we’re going to do when we finally do find a home, and we aren’t looking at listings every weekend.”
They’ll have more time for their DIY projects in their new two-car garage, that’s for sure.
Steven and Carol Smyth aren’t exactly unfamiliar with expensive housing markets. They lived in Camarillo in Southern California for six years before moving to Boston two years ago. But when Steve’s job in the medical informatics business was transferred to Foster City, the couple realized the Bay Area market was a whole new ballgame.
“My wife came out to look for a week exclusively on the Peninsula—places like Palo Alto and Belmont—and she was just shell shocked,” Steve says.
Jennifer branchini, president of the Bay East Association of Realtors.
You might have anxiety about trading up or down locally, but here are some things to remember.
Contingency clause: “Sellers can place a contingency clause on the sale of their home so it is not finalized until they buy another property.”
Rent back: “Similarly, sellers can negotiate terms on a sale that allow them to stay in their house as renters for a certain amount of time until they find a new property.”
Short-term furnished rentals: “Some sellers will put their furniture into storage and move into furnished apartments with short-term leases, as they look to buy. That way, they only set up all their belongings once.”
They soon switched their search to the Tri-Valley, where prices are relatively more affordable. But the empty nesters—their two grown children live in Walnut Creek, which is another reason for the move—have had a hard time finding a home in their price range. And that price range went up dramatically after a month of searching.
“Yeah, that happened very quickly,” says Steve, laughing. “We started out looking in the $725– to $750,000 price range, and now we’re looking as high as $900,000.”
Open houses have been so packed, the couple haven’t even ventured to put in an offer.
“The economic conditions here are a lot different than anywhere else; things are just very tight,” Steve says. “I keep thinking this is a bubble, but it doesn’t seem like it’ll be popping anytime soon.”
The couple have sold their Boston townhome and need to move by June. They had hoped to avoid moving twice, but now realize they may need to rent for a while. They may also sell the Southern California home they have been renting out—at a loss—to help buy the new house in the Bay Area.
“It’s disappointing, and we’re beginning to feel pressure, because we need to move very soon, and we don’t know where that will be,” Steve says.
It all started with a kitchen renovation. Steve and Monika Caltagirone had lived in their Danville home for seven years, and things were starting to look a little shabby.
“I’m the kind of guy who could probably go another 10 years looking at an old countertop or old cabinets,” Steve says. “But we were definitely at a point where we were looking to make some upgrades.”
Before starting the renovation, the couple decided to explore the market to see if they could move into an updated home—and avoid a costly and time-consuming remodel. Their guidelines were pretty specific: They needed a four-bedroom home with an updated kitchen. Most importantly, they had to stay in the same east Danville neighborhood so their two boys, ages eight and 10, wouldn’t have to switch schools. It soon became clear that accomplishing all that would be a delicate operation.
“In our case, the stress was that we had a 3,300-square-foot home filled with stuff, and we didn’t want to go through the hassle of finding somewhere to rent if we couldn’t find something to buy right away,” Steve says.
Plus, “changing schools was an absolute deal breaker,” says Monika.
They were pleasantly surprised when they received multiple offers on their house, including several over asking price. But as the family shopped for a new home, they were outbid on one and backed out of another, after receiving a sketchy inspection report. As the days piled up, they were in danger of losing the offer on their own home. That’s when they took, as Steve calls it, a leap of faith.
Buying From Afar
Khrista Jarvis, J. Rockcliff Realtors, Walnut Creek.
Buying in the Bay Area is hard enough when you’re familiar with the market, says Jarvis, and even tougher if you’re coming from out of town. Here are three tips to hit the ground running.
Hire local: Local lenders and realtors know the terrain, even if you don’t, so take advantage of their institutional knowledge.
Relative expectations: Unless you’re coming from London, Hong Kong, or New York City, Bay Area prices are going to be higher than what you’re used to. The faster you get used to that, the sooner you can bid competitively for a house.
Consider alternatives: If all else fails, consider renting at first.
“That involved committing to the sale with absolutely nothing on the other side,” he recalls. “I was completely freaked out that, one, I’m never going to find something I like, and two, we’ll end up paying through the nose because now I’m desperate.”
But a week later, their real estate agent found a perfect home in their price range and their preferred neighborhood, in Bettencourt Ranch. They were one of the first couples at the open house and put in a strong offer, which was accepted at just $50,000 over the amount for which they had sold their previous home. “The stars really aligned,” says Steve.
The couple couldn’t be happier. The bathrooms and floors in their new home are brand new, and they’re directly across from a community tennis court and pool, a major perk for their boys. Then, there’s the updated kitchen.
“It doesn’t have a dated oven anymore, so that’s fantastic,” Monika says with a laugh. “We love it: I don’t ever see us moving out of here until we’re ready to downsize, when our kids grow up and move out.”
Tina Porciuncula and Ken Martinson had a seemingly simple mission: find a three- or four-bedroom house in Pleasanton for less than $1 million, where they could age comfortably. In their late fifties and early sixties, and with no children living at home, the couple wanted a single-story property.
“And that’s when our whole adventure started,” Porciuncula says.
Renting after they each sold a property in the area, the couple began the search in earnest in early 2013. Ten months and three failed offers later, they finally found a home in Danville, for several hundred thousand dollars more than what they’d originally budgeted.
“I was online every day, several times a day, looking for new listings,” Porciuncula says. “Meanwhile, prices just kept creeping up, and interest rates were getting higher, so it got very sketchy.”
Psychology of Home Buying
Floria Nafei Hakimi, Empire Realty Associates, Danville.
Hakimi has been selling real estate for more than 20 years. She also has a master’s degree in psychology, which she says has been vital to her job. Below are her strategies for navigating the market.
Coaxing compromise: “It’s the job of the agent to interpret what buyers really mean when it comes to their wish list. If they say they want four bedrooms, would three bedrooms and an office work?”
Managing nerves: “Fear gets in the way of a successful outcome. It should be replaced with joy, knowledge, and due diligence.”
Cultivating creativity: “It’s important to see a property’s potential. I’ve shown homes for clients with an architect to get a realistic understanding of what can be done.”
Even more frustrating was the quality of the houses: Dated kitchens, tiny bathrooms, and bad paint jobs were the norm. Porciuncula and Martinson aren’t particularly handy, and neither wanted to go through the time and hassle of a renovation.
“That was probably the most disheartening thing—that a lot of houses in that $900,000 to $1.1 million range were in bad shape,” says Porciuncula. “So we had to really stretch our limit in order to get something that was turnkey.”
Porciuncula’s newly married son, on the other hand, bought a cheaper fixer-upper in Dublin that he’s remodeling in his spare time. It was the only way he could afford a house in this market—one that is quite different from the first home Porciuncula bought 35 years ago in Dublin for $69,000.
“It’s discouraging because houses are just so expensive, and I don’t feel they’re worth that much money. But that’s what it is if you want to live in this beautiful area,” she says. “We would never live anywhere else. There wasn’t even a question.”
The East Bay isn’t all about single-family housing anymore. Danville, Lafayette, and Walnut Creek have become progressively denser, offering urban-style options that defy the area’s suburban reputation.
Danville Hotel, Danville
After years of negotiations, Castle Construction is finally redeveloping the Danville Hotel complex, planning a large-for-Danville mixed-unit development with 16 second-story condos.
Perks: Castle is looking to attract boutique tenants for the project’s 37,500 square feet of ground-floor space, including three restaurants and up to 10 retailers.
Opening: Early 2015.
The Village, Walnut Creek
This large four-story complex from developer Essex Alamo brings 49 condos to downtown Walnut Creek’s southern end, between Broadway Plaza and Kaiser.
Perks: Leasing agent John Cumbelich & Associates has preliminary agreements signed for Starbucks and Paul’s American Bistro to fill part of the 35,000 square feet of ground-floor retail space. A grand patio has access to Las Trampas Creek.
Opening: Late 2014.
Centre Place South, Walnut Creek
The 24-condo project at Olympic and California boulevards would be the second phase of the Hall Equities Group development.
Perks: Units, ranging from 1,500 to 2,500 square feet, offer expansive balconies, some overlooking downtown. The project also includes its own park, an extension of the city’s Alma Park, which can be accessed via an extrawide stairwell. Restaurants and cafés occupy the ground floor, including one “high-end tenant" to be announced soon.
Opening: TBD. (The project must still be approved.)
Lafayette Town Center Phase 3
The latest addition to the transit village next to the Lafayette BART Station brings 69 condos above two levels of underground parking.
Perks: The project contains a mix of one-, two-, and three-bedroom units, a play area, and a sculpture park.
Opening: Summer 2015.
When it comes to square footage, the old adage applies: It’s all about location, location, location.
Address: 750 Van Ness Ave. Size: 1,075 square feet ($929 per). Neighborhood: Van Ness/Civic Center. Type: Penthouse corner apartment. (Monthly HOA dues are $623.) Beds: 2. Baths: 2. Highlights: Fantastic city views, a rooftop deck, and two parking spaces.
Address: 81 El Caminito. Size: 2,360 square feet ($403 per). Neighborhood: Off Ygnacio Valley Road. Type: Detached home. Beds: 5. Baths: 3. Highlights: Hardwood floors throughout, skylights, and located at the end of a private lane.
Address: 112 Campo Ct. Size: 3,328 square feet ($331 per). Neighborhood: Isabel Avenue and Concannon Boulevard. Type: Detached home. Beds: 4. Baths: 3. Highlights: An eat-in kitchen and a backyard with a custom waterfall and fire pit.
Address: 2 Stonewall Rd. Size: 3,068 square feet ($318 per). Neighborhood: Claremont. Type: Detached home. Beds: 4. Baths: 3. Highlights: Vaulted ceilings, a deck with French doors, and an in-law unit.
Address: 27227 S. Leeward Way. Size: 4,061 square feet ($246 per). Neighborhood: Southeast Tracy. Type: Detached home. Beds: 5. Baths: 3.5. Highlights: A master suite with a two-sided fireplace, a gunite swimming pool, and a full-bath casita out back.
A slew of high-density developments is set to flood the rental market in and around downtown Walnut Creek. Here is a sampling of what’s ahead.
What: From Hall Equities Group, this modern six-story building provides 100 luxury apartments about two blocks north of Walnut Creek’s Civic Park.
Perks: All units—from studios to two bedrooms—include full-sized balconies with downtown views. The top floor has a fitness center, and the “Rooftop” features an infinity pool surrounded by lounges, private cabanas, and views of Mount Diablo.
Opening: TBD. The project has been approved.
The Landing at Walnut Creek
What: Located across the street from the BART Station Transit Village, the four-story building will add 178 “high-quality, high-density” residential apartments near the off-ramp at I-680 and Highway 24.
Perks: The building is oriented around a central courtyard, with outdoor seating and lounge chairs. Amenities include a fitness center, rooftop decks, and a lounge.
Opening: Late 2016, if approved according to plan.
1500 North California
What: This six-story project under construction at the corner of North California and Bonanza (across from McCovey’s) has 141 apartments and 19,000 square feet of ground-floor retail.
Perks: In addition to two restaurants and up to six other retail businesses on the ground floor, the project has a fitness center, conference rooms, and various outdoor courtyards and roof terraces complete with BBQ pits and kitchens.
Opening: Late 2015.
Walnut Creek BART Transit Village
What: This 16.5–acre transit-oriented development will bring nearly 600 apartments and 21,950 square feet of commercial space to the Walnut Creek BART Station.
Perks: Developer Bre properties specializes in luxury. Expect club rooms, a high-end fitness center, and other creature comforts.
Opening: TBD. The project is still undergoing review.